Taxation Administration Act
Variation to the rate of withholding for certain terminally ill recipients of lump sum superannuation member benefits
Explanatory Statement
General Outline of Instrument
- This instrument is a notice removing the requirement to withhold amounts from lump sum superannuation member benefit payments made to a beneficiary who is terminally ill.
- This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 15-15 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
- This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
4. The instrument applies from 12 September 2007, which is the effective date of the announced law change.
5. If a payer has withheld amounts from payments which are covered by this instrument after 11 September 2007, the payee may be entitled to a refund of those amounts.
What is this instrument about?
6. On 11 September 2007, the Federal Government announced its intention to amend all relevant legislation to ensure that lump sum superannuation benefits paid to a member who is terminally ill will be free from tax. The change in law is to apply to all relevant payments made after 11 September 2007.
7. This instrument removes the requirement to withhold amounts from the relevant payments.
8. This instrument will cease to have effect on 1 July 2008. It is expected that by that time, the necessary law changes will be made providing ‘tax-free’ status to these payments.
What is the effect of this Instrument?
9. The announced law changes will ensure that no tax will be payable on the relevant payments when an assessment of income tax is made.
10. This instrument ensures that no amounts will be withheld from these payments from the announced date of effect of the planned legislative amendments.
11. It is not desirable for withholding to take place as the recipient will not be liable for income tax in respect of these payments.
Background
12. The Commissioner’s power to vary the rate of withholding for a class of payees is very broad. The general intent of the variation power is that it be used to ensure that withholding amounts are a reasonable approximation of the tax payable on the relevant payment.
13. In this case the power has been used in advance of the enactment of the relevant legislation to ensure that affected payees are spared unnecessary hardship.
Consultation
14. This instrument implements an announced change to the law which will benefit all affected payees.
15. This instrument is urgently required to avoid unnecessary hardship for affected members of the community. Consultation would have delayed this process unreasonably.
Deputy Commissioner of Taxation
25 September 2007
Legislative references:
Taxation Administration Act 1953
Legislative Instruments Act 2003
Income Tax Assessment Act 1997
Superannuation Industry (Supervision) Act 1993
Retirement Savings Accounts Act 1997